Dynamically optimal after-tax grain storage, cash grain sale, and hedging strategies
This article utilizes a stochastic dynamic programming (SDP) model that considers the state variables of (a) before-tax income, (b) grain storage, (c) quantity of futures position, (d) value of futures position, (e) wheat price, and (f) basis level. Decision variables are monthly cash grain sales and futures market transactions. In comparing the post-sample performance of SDP to other marketing strategies over a four-year period, SDP resulted in $5, 961 to $25, 021 more wealth than the other strategies considered. Also, these other strategies yielded a standard deviation of after-tax income that was 30% to 621% greater than that from the SDP framework. © 1991 American Agricultural Economics Association.
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